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Trade Trends News
19-12-2023
China earlier this month loaded up on U.S. soft red winter (SRW) wheat after its own crop’s quality was compromised by heavy rains, helping drive U.S. SRW exports to a 10-year high this marketing year.
On the other hand, U.S. hard red winter (HRW) wheat exports in 2023-24 are set for all-time lows among 40 years of records, despite HRW wheat being more plentiful than SRW and typically more dominant on the U.S. export front.
The U.S. Department of Agriculture on Thursday showed net 2023-24 wheat export sales were 1.49 million metric tons in the week ended Dec. 7. That is the largest weekly sales volume for a current marketing year since September 2007.
Some 1.12 million of those tons were SRW sales to China, which had been expected based on sales announcements during that week. China now accounts for 46% of all U.S. SRW sales, which account for 29% of all wheat sales.
According to export market development organization U.S. Wheat Associates, U.S. SRW wheat is closest to the wheat grown in China. Lower-protein SRW wheat is typically used to make cookies and crackers while higher-protein HRW is good for bread.
In the latest five years, HRW accounted for an average of 36% of annual U.S. wheat exports while only 12% was SRW. But government forecasts peg SRW at 24% and HRW at 20% in 2023-24, the first role reversal in the 40-year data history.
Hard red spring (HRS) wheat usually accounts for about 28% of annual exports, and for the first time in eight years is set to be the most exported U.S. wheat class in 2023-24.
The last time China bought large U.S. wheat volumes was in 2020-21, favoring HRW and soft white winter wheat (SWW), often used to make Asian-style noodles. Throughout 2020, the premium of Kansas City wheat futures versus Chicago was among the narrowest ever.
But K.C. wheat, representative of HRW, in 2023 traded to a record margin over SRW-associated Chicago wheat futures. However, on a most-active basis, the K.C.-Chicago premium on Thursday dropped to the lowest levels since March 2022.
STOCKS AND EXPORTS
Despite being smaller by magnitude, U.S. SRW wheat ending stocks are expected to be relatively more plentiful than HRW in 2023-24, which ends on May 31. USDA’s SRW ending stock peg of 118 million bushels is a five-year high and up 31% on the year.
HRW ending stocks for 2023-24 are projected at 280 million bushels, up 20% from a 15-year low last year but 32% below the five-year average. SRW stocks are estimated up 10% from the five-year average.
USDA sees total 2023-24 U.S. wheat ending stocks up 13% from the prior season’s 15-year low but still considerably lighter than in most other recent years. However, 2023-24 U.S. wheat exports remain pegged at 52-year lows as Black Sea supplies continue to dominate the global market.
U.S. exporters are on their way to that target thanks to China’s recent activity. Export sales through Dec. 7 covered 74% of USDA’s 2023-24 forecast, above the date’s five-year average of about 66%.
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